SCN Podcast: Two-Tier ERP and SAP Business ByDesign for Subsidiaries

For my SCN podcast series this year, the SCN team has taken a collective challenge to come up with the most compelling topics we can. SAP Business ByDesign for subsidiaries certainly fits into that category for me. There’s a good amount of information about SAP Business ByDesign now, but not as much about the subsidiaries angle. This topic speaks to how large enterprises are becoming more networked with their subsidiary divisions. This is where the notion of a “two tiered ERP strategy” comes into play (see what analyst Ray Wang had to say on two-tiered ERP).

It makes sense that for subsidiaries, especially for growth-oriented divisions or those who do not want to invest in an internal IT competency, that cloud ERP would be a serious consideration. But there are also questions about how a smaller division with a need for more flexibility could co-exist with larger enterprises that live and breath on standards and compliance.

To get at those questions, and to understand how SAP Business ByDesign fits into the picture. we’ve got a very interesting podcast with Claus Gruenewald and Siva Darivemula of SAP. As the Vice President of SAP Business ByDesign, Claus has been heavily involved in ByDesign for subsidiaries, and Siva has been leading up the ByDesign community on the SAP Community Network.

During the 30 minute podcast, we explore the issues of cloud ERP for subsidiaries before digging into SAP’s ByDesign plans at TechEd and how to get involved in the ByDesign discussions on SCN. One high point of the podcast? Claus had several customer examples to share that provide a practical view of how ByDesign for subsidiaries works in action rather than just in theory. As usual I’ll include some bullet point highlights from the podcast below.

(If for any reason the player doesn’t work, you can download the podcast using the “download media” link on the right hand side).

1:00 Jon to Claus: Many of our listeners want to learn what large enterprise networks are all about and how cloud ERP fits in. Claus:Large scale ERP is just too big for them, which is not good for speed of deployment and it’s not good for the user in the end.

The smaller businesses, if you look at them, they are going into their business network very agile, and as a result, they are looking for something flexible to grow their business. They use IT, but in a different way.

4:10 Jon to Claus: With the potential for standardization to kill innovation, it sounds like a conflict between large and small divisions, so how do you deal with that? Claus: I recommend a two tier ERP strategy, which allows CIOs to approach this issue in an intelligent way. So why not combine on-premise solution with an on-demand solution that can be easily deployed? If you look at an SAP Business ByDesign solution which is an end-to-end suite, much more than CRM or purchasing, it’s end to end, order to cash, the complete business processes including reporting and analytics.

8:10Jon to Claus: Can you give us some customer examples of ByDesign in subsidiaries? Claus: Nokia equipped their Indian sales offices with ERP in the cloud, in this case ByD. This is more than CRM: they run orders, they have the financials on the back end. One after another, they equipped their sales offices where they were up and running every few weeks. On premise is not that fast and agile in rollout. Another example: Dow Chemicals used ByD for their two tier strategy with their R and D shops in the US, which go into niche markets and then develop the niche. Those companies also need to consume software out of the cloud.

12:00Jon to Claus: Let’s talk ByD deployment – cloud ERP may be faster, but you don’t snap your fingers, what is deployment like? Claus: with the usual deployment of ERP on-premise, you start with the blueprint and put industry requirements in there as well. The blueprint is a long phase and you go through customization of that blueprint, which makes a lot of sense if you want to model a very large organization’s requirements into one cohesive blueprint. But with smaller organizations, we interviewed many of them to understand the 20-25 percent that all companies need. That’s what we call the core ByD system, this is basically pre-configured.

Then you have a role and a work center aspect. This is how a given person actually works. With that in place, you can actually speed up the implementation. If you make the infrastructure available to many customers, you can deploy it and bring it up quickly. In two hours we can have a new tenant available, and a ByD project runs between one week and twelve weeks depending on the scope. If it’s just CRM it’s very quick. If it’s the whole business process, CRM, HR, Financials and purchasing plus project systems, it can be three months, but in that time frame, they are totally up and running.

14:30Jon to Claus: For large enterprises evaluating the cloud, issues include speed of deployment, flexibility, and security – what are the other decision factors? Claus: I see two more for large organizations: one is integration. If you have loosely coupled systems in a large network, integration aspects are required. You always try to have mapping tables in between, which gets very costly and takes much more time. Then there is financial consolidation, which means at the subsidiary level, once a week, or once a quarter, you have to consolidate it back to headquarters in some fashion. The standard integration aspect is a key decision factor for many enterprises.

20:05 Siva to Claus: Do you see geographical differences in Europe, US, Asia? Claus: there are some. The biggest difference I see is the countries where large enterprises have their network and look for support. In North America, that means Middle America, Latin America and China. So they want to support in China, Mexico, and sometimes India. By contrast, European companies do a lot of business in eastern Europe including Poland and Russia, this is where their fast growing startups are and their fast growing sales organizations are, so that’s a major difference, in terms of where the businesses make their money and achieve their growth.

23:15 Siva to Claus: As traditional businesses expand to on-demand, are there any organizational competencies or skills needed to get the most out of cloud ERP? Claus: it’s not so much about the skills, it’s about trust in on-demand. Put yourself in the shoes of the large enterprise customer: they run their own data centers, if something goes wrong, they think they know who is responsible.

25:30 Siva on ByD Community plans – For those of you who haven’t been on the SAP Business ByDesign, it’s on the BPX community on SCN, in a section called cloud and on-demand solutions, and there’s a lot going on there. You can get hands-on experience to get a handle on how these solutions fit together; there’s blogs and a ton of information we are adding to on a regular basis. The best place to ask questions and get them addressed is on the forums. If you go to the community page, you can see what’s going on there and you can join the forums there as well. Also, we are getting close to TechEd, there’s a ton of stuff folks can expect from SAP there, including many hands-on workshops and sessions. We hope to see you there.